Professional blog

Part 1

SportsMax sells sporting goods equipment at 100 stores throughout North America. Robert Manning is the manager of one SportsMax retail store in Chicago. The company is in the planning phase of establishing its operating budget for this coming year and has asked that all store managers submit their estimates of sales revenue, costs, and resulting profit. During the control phase, each store manager is evaluated by comparing budgeted profit with actual profit. Store managers who exceed budgeted profit are given a bonus equal to 10 percent of actual profit in excess of budgeted profit.

Required:a. Describe the ethical conflict that Robert Manning is facing.b. As the president and CEO of SportsMax, how might you motivate Robert Manning to provide an accurate operating budget?

Part 2

Net Present Value Analysis. Architect Services, Inc., would like to purchase a blueprint machine for $50,000. The machine is expected to have a life of 4 years, and a salvage value of $10,000. Annual maintenance costs will total $14,000. Annual savings are predicted to be $30,000. The company’s required rate of return is 11 percent.

Required:a. Ignoring the time value of money, calculate the net cash inflow or outflow resulting from this investment opportunity.b. Find the net present value of this investment using the format presented in Figure 8.2. c. Should the company purchase the blueprint machine? Explain.

Part 3

For this week’s reflection, please describe the components of an operating budget and how the different components contribute to the overall budget. Minimum words is 250. Cite any references used in apa format.